Central bankers are to shift towards a more gradual monetary tightening, economists predict, as recent “jumbo” rate moves show signs of taming inflation and officials acknowledge the growing threat of recession.
After central banks’ last meetings and a cooling in US inflation to 7.7 per cent in October from 8.2 per cent in September, markets are pricing in a greater probability of 50 basis point rather than 75bp rises in the banks’ next announcements, and smaller rate rises continuing into next year.
The US Federal Reserve, European Central Bank and Bank of England had given a “clear signal” that “we’re coming towards a period of slower tightening, mirroring what we’ve seen from Australia, Canada and Norway”, said James Pomeroy, an economist at HSBC.
